Cambodia Economic Outlook

August 20, 2019

Economic growth has likely been brisk so far this year thanks to strong fixed investment, private consumption and tourism inflows. In H1, total visitor arrivals were up 11% year-on-year, driven by soaring Chinese tourist numbers—underlining Cambodia’s ever-closer relationship with Beijing. In addition, total credit was up by roughly a quarter in annual terms in the first three months of the year according to the most recent Central Bank data, boding well for domestic demand. Moreover, the construction sector—fueled by Chinese capital—saw approved investment rise sharply in the first half; however, this is also generating concerns over credit quality and a possible rise in non-performing loans. Meanwhile, in politics, in August the government announced a reduction in public holiday numbers to boost output and competitiveness.

Cambodia Economic Growth

While growth should weaken in 2019 from last year’s 11-year high, Cambodia will remain among ASEAN’s best-performing economies thanks to rapid growth in fixed investment and greater visitor arrivals. The possible withdrawal of preferential market access to the EU, waning global growth and a vulnerable domestic financial sector—due to elevated lending growth, particularly in construction—pose downside risks. Our panelists expect the economy to grow 6.8% in 2019, which is unchanged from last month’s forecast, and 6.6% in 2020.

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